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2017 (5) TMI 1639 - AT - Income TaxCalculation of deduction u/s 80HHC - inclusion of the DEPB receipt for calculation of deduction - Held that:- Similar facts had already been decided by the ITAT in favour of the assessee for the assessment year 2002-03 as held in the scheme of section 80HHC, the face value of DEPB cannot be reduced from the purchase cost but is separate income under section 28(iiib), which accrues at the time of making application pursuant to exports. Only the profit element on the sale of DEPB, that is the amount in excess of sale proceeds over the face value, is covered under section 28(iiid). Exclude Sample Design and Development charges receipt for calculation of deduction u/s 80HHC - Held that:- As decided by the ITAT in assessee's own case we do not see any infirmity in the order of the ld. CIT(A) who rightly held that the receipts on account of sample design and development charges are export turnover and represents the business income of the assessee and thus, cannot be excluded as the receipt under Explanation (baa) of Section 80HHC of the Act. Additional depreciation - Held that:- In the present case, it appears that inadvertently the assessee could not make the claim for additional depreciation before the AO but in the appellate proceedings before the ld. CIT(A) the assessee made the claim and furnished the additional evidences in support of its claim. It is well settled that the powers of the ld. CIT(A) are coterminous with the powers of the AO, therefore, considering the totality of the facts, we are of the view that the CIT(A) rightly directed the AO to examine the claim of the assessee and allow after verification. We do not see any valid ground to interfere with the findings of the ld. CIT(A). Addition on account of Arm’s Length Price - Disallowance under wrong section - addition on the grounds that the payment of royalty is not wholly and exclusively for business purposes and has been made u/s 92C(4) read with section 92CA(4) - Held that:- The assessee derived benefit under the royalty agreement and it was accepted by the AO for the assessment year 2002-03. However, the only dispute raised by the AO in the said assessment year was as to whether the royalty payment was a capital expenditure or revenue expenditure. The said dispute has been settled by the ITAT vide aforesaid referred to order dated 30.03.2016 and it was held that the royalty payment was revenue expenditure and not the capital expenditure. In the present case, the royalty expenditure by the assessee was fully and exclusively incurred in the regular course of business and after incurring this expenditure the assessee declared profit @19% which was better than the GP rate of 12 & 16% declared by the comparables. Therefore, it was at arm’s length and the addition made by the AO was not justified which has rightly been deleted by the ld. CIT(A). - Decided against revenue
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